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Tuesday, 30th May 2006 (4165 views)

Gammon Lake Resources, an exploration company based in Nova Scotia with properties in Mexico, has agreed to buy 100 per cent of Mexgold Resources, subject to shareholder approval from both companies.

Gammon Lake currently has a stake of 20 per cent in Mexgold.

The company has offered a share-swap deal that would exchange each Mexgold common share for 0.47 of a Gammon Lake share. The deal represents an implied value of $7.49 per common share and values Mexgold at $451 million.

The merger would create a new mid-tier company trading in gold and silver with a fully-diluted market capitalisation of over C$1.6 billion and potential production of 400,000 gold equivalent ounces, including 235,600 gold ounces.

The merger transaction would develop joint operation and development of a combined portfolio of projects in Mexico. It would finance the closing stages of Gammon Lake's flagship Ocampo project and develop the El Cubo mine, currently the property of Mexgold.

Gammon Lake's president, Fred George, commented that a merger would "create an unhedged multi-mine intermediate gold and silver company with substantial long-life production, low cash costs and significant exploration potential."

 

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